Fitch: El Salvador's Electricity Sector a Challenge for the New Government

Business Wire

posted: 85 DAYS 11 HOURS AGO

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The El Salvadoran energy sector continues to deal with a certain degree of political and regulatory uncertainties following the recent changes in government, according to a Fitch Ratings report. Fitch does not expect these uncertainties to abate over the near-term.

El Salvador's electricity industry exposure to government intervention and regulatory uncertainty during recent years has affected the financial performance of the companies in the sector. The effect of government intervention has been somewhat mitigated by recent measures taken by the current administration to eliminate energy subsidies and to free up electricity tariffs so that distribution companies can recover electricity costs from end users rather than from the government.

Recent measures to partially eliminate energy subsidies are expected to improve companies' financial profile by reducing their dependence on government transfers. Conversely, the elimination of energy subsidies may lead to an increase in the price paid by the end user, resulting in a contraction in demand, which in turn may dampen net income and cash generation.

The full report, 'El Salvador's Electricity Sector: Industry Risks and Challenges for the New Government', is available on the Fitch Ratings' web site at www.fitchratings.com. The report is available in both English and Spanish and provides additional analysis on the two major electric companies in country: Grupo AES El Salvador and Distribuidora Electrica Delsur S.A. de C.V.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.